In 1994, when AT&T spun off a portion of its business to form Lucent Technologies, investors eagerly awaited their opportunity to buy shares in what they thought was the hottest telecommunications stock around.

Seven years and technology bloodbath later, Lucent investors have dumped the stock after it registered a billion dollar loss during the first three months of its fiscal year, which ended 31 December.

Lucent shares have taken it on the chin, tumbling 30% since 1 February to about $13 apiece.

Last Friday, in a last-ditch effort to raise $6.5bn in cash, Mr Schacht held a conference call with 30 bankers describing the company's plan to revive itself, according to an article in Monday's Wall Street Journal.

An American icon

When AT&T divested itself of the parts that became Lucent, it gave up much of the legendary Bell Laboratories, which many Americans had relied on for decades for developing and producing telephones.

By the mid-1990s, Bell Labs had moved beyond hardware to include software, developing the Unix operating system and the "C" programming language, or computer instruction.

And it was that software development expertise that fostered investor enthusiasm for the newly formed Lucent when it went public seven years ago.

While today's Lucent still makes telecoms equipment and software, most of Lucent's customers are network operators such as AT&T, which accounts for 12% of sales according to Hoovers.

Job cuts

In 2000, Lucent spun off its enterprise networks business (now known as Avaya) while it plans to spin off its microelectronics (Agere Systems) unit.

It is also selling non-core businesses to focus on high-growth areas, including fibre optics, and cutting costs through layoffs and other restructuring.

In January, Lucent said it intended to cut 10,000 jobs, or 10% of its work force, and take up to $1.6bn in restructuring charges in its bid to return to profitability.

Despite its vaunted position in the telecoms sector, Lucent was as much a victim of the technology stock rout that gutted telecom issues late last year.

Investors sold shares in tech stocks after a lack of profits and faulty business models failed to produce the results they sought.

Profit warning

But it was in July that investors and analysts got a whiff of new problems when the company warned that it would miss profit expectations.

Investors and analysts had criticised the company for moving too slowly in making changes to its corporate structure and spinning off portions of its business - shades of its AT&T past.

Lucent's board of directors responded by asking for - and getting - the resignation of then chief executive Richard McGinn.

With his $6.5bn hard-sell debt deal, current boss Henry Schacht has convinced a few creditors he can indeed reinvigorate Lucent.

According to the Wall Street Journal, at least a dozen lenders, both US banks and those based overseas, responded to Mr Schacht's pleas, and agreed to participate in the new financing plan.